 Chancellor Gordon Brown's Budget announced on 16 March 2005, grants gay and lesbian couples tax equality. Maggie Fleming reports.
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We can safely break out the champagne now!
The budget speech itself wasn’t terribly interesting – with an election just a few months away, the Chancellor wasn’t going to do anything to rock the boat. Instead, he gave something to all the vital constituencies and, in particular, home-buyers, parents and pensioners. Nothing unexpected there.
But hidden among the press releases and other wads of paper produced on Budget Day was Budget Note 28, entitled ‘Tax and Civil Partners’.
Reading it, I realised that all the tax rights we have been campaigning for for many years now will be included in the Finance Bill. In particular, registered partners will be able to gift each other assets, either in life or on death, without having to pay inheritance or capital gains taxes.
The dreadful inequality where a husband could leave his wife millions without the estate paying a penny of tax but the survivor of a same sex couple might have to sell his home in order to meet the inheritance tax bill is finally ended.
From 5 December, when the Civil Partnership Act comes into force, registered partners will be able to employ the same strategies that married couples have always been able to use to mitigate their tax liabilities. The higher earning partner in a couple can gift income-producing assets to the other, who will pay tax at a lower rate.
If someone wants to sell an investment property which will generate a large capital gain, he or she can gift a 50% interest in the property to his or her partner before sale and thus reduce the tax payable.
Of course, there is a downside, too. Over the years, legislation has been introduced to stop married couples taking advantage of technical loopholes to avoid tax. Any anti-avoidance legislation that applies currently to married couples will apply to registered partners also from 5 December.
There are few areas of tax law where unmarried couples have had an advantage over married couples. One of them relates to the principal private residence exemption from capital gains tax.
As you may know, you don’t pay CGT when you sell a property that is your only or main residence. Up to now, partners in a same sex relationship can each have their own main residence and claim exemption on the sales of both.
From 5 December, registered couples will only be able to claim one main residence exemption between them.
At the minute, if your partner’s father sells you a flat for less than its market value, the Revenue is unlikely to enquire into the matter. At present, as far as tax law is concerned, your partner’s father is not connected to you in any way.
But from 5 December, you and he will be ‘connected persons’ which means that the Revenue will deem that flat to have been sold at market value, whatever money changes hands.
But those are very, very minor matters.
What really matters is that from 5 December those of us who register our partnerships are going to be treated by the Inland Revenue for all intents and purposes as equal to married couples.
No more will I pick up the phone to hear a plea for help from an elderly man whose partner has just died and who faces the prospect of having to sell the house they lived in together for 40 years because there’s no other way to pay the IHT.
Nor will it be a woman who’s worried and miserable because she and her partner bought a house in Wimbledon and it’s now worth half a million and they see a future IHT problem instead of a source of pride! Nor will it be the woman whose partner has just died without leaving a will and the partner’s mother has made it clear that she wants her out of the house pronto.
There have been times when I wondered if we would ever get this equality. And now here it is. And how very British, too – no huge fanfare, just the 23 paragraphs of Revenue Budget Note 28.
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